The Sri Lankan government will formally begin negotiations with international creditors on Friday to begin restructuring billions of dollars of the island’s debt and discuss strategies for addressing the biggest economic crisis in more than seven decades.
For the 22 million-person country to receive final clearance for a $2.9 billion loan from the International Monetary Fund and subsequent assistance from other international organizations, the restructuring process must be successful.
The funds would aid the island nation in overcoming a severe food and fuel deficit that provoked protracted street demonstrations this year and resulted in the removal of then-President Gotabaya Rajapaksa.
The goals of the loan package Sri Lanka agreed to with the IMF on September 1 and the following steps in the debt restructuring process will be discussed in a virtual interactive session to be held by the country’s finance and other officials.
After the event, the public will be able to view its presentation to creditors. The government and diplomats stationed in Colombo have already undertaken preliminary restructuring discussions.
On condition of anonymity, a representative of the president’s office stated that the Thursday meeting with ambassadors received a “very positive response.”
Sri Lanka is concentrating on trying to finalize the IMF contract by December or early in the following year.
According to an update from the Ministry of Finance in August, Sri Lanka’s foreign currency debt stood at $47.3 billion as of the end of 2021 and its local currency debt at $53.6 billion. Its top three bilateral creditors are China, Japan, and India.
In addition to the foreign currency debt, $13 billion is made up of foreign sovereign bonds that are mostly held by private creditors, like asset managers BlackRock and Ashmore.